Charles Schwab says it uses analytics to help listed investment advisory firms streamline their clients’ portfolios.
Using the analytics, Schwab has helped consulting firms navigate situations ranging from over-models and staying ahead of market cycles to succession planning and consolidation, according to Jake gilliam, head of multi-asset solutions at Charles Schwab Investment Management.
The scans are like an x-ray of a consulting firm’s portfolio, which is then compared to Schwab’s own portfolio-building framework, says Gilliam. Schwab performs passive, fundamental and active capitalization-weighted portfolio analysis, which allows the company to have a consultative conversation with advisers, he adds.
Schwab has seen “many instances where advisers have dozens of models,” including one that had more than 50 models, which has become “very heavy” for this company, according to Gilliam.
“During our x-ray and consultation process with them, we were able to help them come up with a dozen models that they would use across their business, helping them cut costs by around 60 to 80 points. base by model. up to around 20 to 30, ”said Gilliam, referring to this company, which he did not identify.
“It allowed them to really focus on growing the business, keeping people on track with their financial plan,” he added.
Many advisers have added growth-oriented investments to their portfolios, “effectively trying to capture what has worked well in the market in the past,” says Gilliam. In such cases, he says, Schwab has helped advisors think of ways to diversify their portfolios at a lower cost.
Citing another example, Gilliam says Schwab helped an advisor add other investment strategies to previously exclusively actively managed portfolios recommended by the company his father founded, which he did not identify.
The advisor wanted to appeal to “the new generation of investors” who are more open to exchange-traded funds and more comfortable with broad market exposure, according to Gilliam.
Gilliam says Schwab helped the advisor discuss with his father how to combine “the best ideas from the active exposure that the company had built” with less expensive and less complex strategies.
Schwab is also able to help companies that have consolidated, which translates into “a lot of different approaches for customers” that are “really hard to scale, according to Gilliam.
Using analytics, Schwab can show these companies the different models their advisors use and how those can be reduced, according to Gilliam. One way to do this is to have a more common investment approach for the bulk of the portfolio, while leaving a smaller allocation to the one-time contribution of an advisor, he says.
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